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Asymmetric Effects of Long and Short Selling Positions: Evidence from US Stock Markets

Author

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  • Kwaku Boafo Baidoo

    (Mendel University in Brno, Faculty of Business and Economics, Czech Republic)

Abstract

This paper investigates the effects of short/long positions on the return volatility of the market using high frequency, intra-day data from 2009 to 2020. We employ an asymmetric EGARCH model and find evidence of high persistence of return volatility. We cover the long periods of increased market turbulence over the decade. We show the time-varying volatility of the US stock market and emphasize the asymmetric effects of positive/negative shocks in the extreme market conditions and the destabilizing effects of short selling activities on the financial markets. Our results provide significant implications for portfolio management, especially for profitable short-selling strategies in turbulent periods.

Suggested Citation

  • Kwaku Boafo Baidoo, 2021. "Asymmetric Effects of Long and Short Selling Positions: Evidence from US Stock Markets," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 71(4), pages 306-322, December.
    • Handle: RePEc:fau:fauart:v:71:y:2021:i:4:p:306-322
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1492
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    More about this item

    Keywords

    long/short positions; EGARCH; return volatility;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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